Oil prices plunged on Wednesday, falling below $100 per barrel, as markets reacted to a temporary ceasefire agreement between the U.S. and Iran that raised expectations for a potential reopening of the Strait of Hormuz.
Brent crude dropped $14.52, or 13.3%, to settle at $94.75 per barrel, while U.S. West Texas Intermediate (WTI) fell $18.54, or 16.4%, to $94.41. The sharp selloff reflects optimism that disrupted supply—much of it stranded during the conflict—could begin flowing back into global markets.
The two-week ceasefire agreement has shifted sentiment significantly, with traders anticipating at least a partial resumption of shipments through the Strait of Hormuz, a key transit route for roughly 20% of global oil supply. The prospect of pent-up supply re-entering the market has driven a rapid unwind of the geopolitical risk premium.
Despite the steep decline, uncertainty remains elevated. Shipping activity through the strait has yet to fully resume, and reports indicate that transit remains tightly controlled, with vessels requiring authorization. Market participants continue to view the ceasefire as fragile, with risks of renewed disruption still present.
Geopolitical tensions persist across the broader region, including continued strikes and reported infrastructure attacks, underscoring the complexity of achieving a sustained de-escalation.
Even in the event of a reopening, normalization of flows is expected to take time. Clearing vessel backlogs, restoring export logistics, and ramping up production will likely be gradual, limiting the speed at which supply returns to pre-conflict levels.
Additional pressure came from U.S. inventory data, which showed a larger-than-expected build in crude stocks, further reinforcing the bearish tone.
Overall, while the ceasefire has prompted a sharp correction in prices, the market remains highly sensitive to developments around the durability of the agreement and the pace at which global oil supply can recover.